I would appreciate your opinion on the question below in that has anything changed for the 2018 or 2019 tax year in terms of cross border taxation. The only income being received in South Africa is a small annuity and rental income.
Important:
This answer is based on tax law for the tax year ending 28 February 2019.
Answer:
According to the agreement, a very old one, between the two countries, a “resident of the Union” and “resident of the Federation” mean respectively any person who is ordinarily resident in the Union for the purposes of the Union tax and not ordinarily resident in the Federation for the purposes of the Federal tax and any person who is ordinarily resident in the Federation for the purposes of the Federal tax and not ordinarily resident in the Union for the purposes of the Union tax;
In that Agreement, unless the context otherwise requires –
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“Union” means the Union of South Africa;
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“the Federation” means the Federation of Rhodesia and Nyasaland…
In terms of Article IX (1), “an individual who is a resident of the Union shall be exempt from Federal tax on profits or remuneration in respect of personal (including professional) services performed within the Federation in any year of assessment if –
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he is present within the Federation for a period or periods not exceeding in the aggregate 183 days during that year; and
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the services are performed for or on behalf of a person resident in the Union; and
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the profits or remuneration are subject to Union tax.”
Section 10(1)(o)(ii) of the Income Tax Act (currently) exempts amounts received (accrued) in respect of services rendered outside the RSA by an employee for or on behalf of any employer (RSA or Zambia), if that employee was outside the RSA for the required number of days (183 and 60 in the 12-month period).
This will change with effect 1 March 2020 when it will only be the first R1 million of the remuneration that will qualify for the exemption.
Article VII(1) and (2) deal with annuities, but it will essentially be taxed in the RSA. The same applies to the rental income – I accept the property in situated in the RSA.